When I was digging out of debt a decade ago, I made it a habit to track every penny that I earned and spent. This was one of the keys to changing my relationship with money. By logging every expense, I was able to discover where my money really went (as opposed to where I thought it was going). This allowed me to make changes to my life that led to financial independence.

Today, I'm financially independent. I have enough saved and invested that I should be able to support my current lifestyle indefinitely. Based on numbers from my favorite online retirement calculators, my nest egg will support spending of around $4000 per month for the next forty years. I'm under the impression that I spend about $36,000 per year (or $3000 per month), so I should be safe.

But do I really spend $3000 per month? And even if my spending is that low, are there places I could cut back? Am I wasting money on anything? Are there steps I could take to spend more efficiently? That's what I aim to discover by tracking my spending this year.

It might surprise you to learn (because it certainly surprised me!) that many Money Boss readers are eager to follow this project. In fact, I get more email about this subject than anything else right now. “When are you going to start tracking your spending? What tool are you going to use?” I didn't realize there was so much interest in this or I would have done it long ago.

Before I can begin this project, I need to do two things:

I need to establish a baseline. That is, I need to gather all of my account into one place and determine what my starting numbers are.

I need to pick a tool (or two) to track my money. Do I return to my old friend Quicken? Or do I try one of the new-fangled smartphone apps?

I've been working on both of these tasks simultaneously.

Crunching the Numbers

During December, I updated all of my account info in my old Quicken file. I also resumed the habit of logging every receipt and assigning each expense a category. I forgot how fun this is for me! Some people hate this habit — my girlfriend Kim loathes logging expenses — but because I'm a money nerd, I enjoy the process of manually entering data and generating reports.

I spent several hours one Sunday morning pulling together all of the info I needed. After that, I made sure to log my expenses at the end of each day. (While I encourage Money Boss readers to look at their finances once a week, I've found that when I'm in this mode it's much better for me to do this daily.)

On the final day of December, after I entered the last transaction for the year, I calculated my net worth:

That's my starting point for 2017. (It's also the first time I've publicly shared my exact net worth. That ought to remove some mystery and speculation for a few folks.)

Out of curiosity, I ran a net worth report for the last full year I tracked my spending. At the end of 2013, my net worth was $1,594,698.66. At the end of 2016, it was $1,570,798.39. That's a decline of $23,900.27 in three years, or about $8000 per year. Based on that alone, it seems likely that my savings can support my current lifestyle. (The math shows I could keep doing what I'm doing for 196 years!)

Note:I believe it's an excellent idea to calculate your net worth on a regular basis. Once a year is good, although some people might prefer to run the numbers once each quarter. To make things easy for Money Boss readers, I've created this freenet worth spreadsheet in Google Docs for you to download or copy.

Picking a Poison

With all of my accounts in order and my net worth calculated, it was time to pick a tool to track my money.

Over the past few months, Money Boss readers have been telling me about their favorite apps and computer programs. Plus, I've been asking people for recommendations in person. Based on your feedback — and on my own personal preferences — I developed a short list of candidates:

Quicken, the desktop software I've used to track my money for over a decade.

QuickBooks, the business big brother of Quicken. I already use this for my business finances.

A custom spreadsheet, which seems to be a common choice for the money nerds who read this site.

You Need a Budget (a.k.a. YNAB), a very popular piece of software that focuses less on expense tracking and more on actual budgeting. (It's aim is to “give every dollar a job”.)

Personal Capital, a smartphone and web app I've already been using to casually watch my accounts.

Mint, one of the first web-based personal-finance tools. Now owned by the same folks who make Quicken and QuickBooks.

I was able to eliminate a couple of these options almost immediately.

I tried to set up a spreadsheet, for example, but it just didn't work for me. Don't get me wrong. I'm a total spreadsheet nerd. (I just created one last week to track all of my transportation — walking, biking, driving — for 2017.) But tracking my money with a spreadsheet seemed too clunky.

On the suggestion of my accountant, I also tried to track my money using QuickBooks. I use QuickBooks to handle my business finances already, so I'm familiar with the software. Plus, isn't my primary message at Money Boss that you should manage your household budget as if you were managing a business? But I hate the QuickBooks interface, so I found the process more hateful than helpful. And I couldn't figure out how to handle normal transactions. Should I consider the electric company a vendor? What about the HOA? And how would I track my investment accounts?

In the end, I decided to consider four options: Quicken, YNAB, Personal Capital, and Mint.

I've been toying with these tools for a couple of weeks, and I'm ready to offer some initial thoughts. Each day next week, I'll review one of these methods. Stay tuned!

In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.

Interesting exercise. Just like you, I used to track my every dollar when I was digging my way out of a bit of a financial black hole. Ever since I got my financial house in order, however, I have stopped logging every transaction. These days I simply budget in advance, and then track how my net worth changes on a monthly basis.

I think it is a good idea to resume complete tracking every once in a while, because there will be obvious discrepancies between how you think you spend your money, and how you actually spend it. I think in a couple of years, when my circumstances have changed enough from back when I tracked my spending, I will repeat the exercise for a year or so.

As for software, I am definitely one of the spreadsheet nerds you’re referring to in your article. Just yesterday I spent a couple of hours optimising the references in the various tabs of the sheet I use to calculate my net worth. Looking forward to reading more about this, and seeing what you choose. It seems like Personal Capital is the go-to for most bloggers these days, but for those of us outside the US it isn’t even an option.

We just shifted from a spreadsheet to the HomeBudget app. It syncs between my phone and my husband’s and you can email monthly reports/CSV files to yourself. I like being able to enter an expense on my phone, immediately after purchase.

You’re missing the one I use, and I really believe you should consider it. :)

A lot of people don’t know about KMyMoney because it was originally a Linux/Unix app, but it’s also available for Windows now. I’ve been using it for years and installed it on my 62-year-old mother’s Windows 7 PC recently. She’d used Quicken a looooong time ago and last used Microsoft Money about 5+ years ago, but she had no trouble jumping in and using KMyMoney after a brief introduction.

Have you looked at Goodbudget (used to be EEBA)? It has a free version, or a Deluxe version that has multiple accounts, for $45 per year…not a user, just interested in something other than YNAB – which I find non-intuitive…

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My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

General Disclaimer: Get Rich Slowly is an independent website managed by J.D. Roth, who is not a trained financial expert. His knowledge comes from the school of hard knocks. He does his best to provide accurate, useful info, but makes no guarantee that all readers will achieve the same level of success. If you have questions, consult a trained professional.

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